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Untruthful doctor restrained from his own rival practice

A medical centre has successfully obtained an interim injunction against one of its former GPs, restraining him from working within a 10km radius of his former practice, including in his newly established rival medical centre, until January 2016. A history of telling non-truths did not help the GP to defend the medical centre’s application for the interim injunction.

What happened?

In April this year, a GP gave six months’ notice of termination of his contractor arrangement to a medical centre after working there for just over two years. The contract contained cascading restraints – the maximum restraint area cascading down from 25km to 5km and the maximum restraint duration cascading down from a period of 12 months to three months after the contract ended.

Throughout the notice period, the GP sought to reduce his contact hours at the clinic for a range of reasons including his own poor health, the poor health of his parents, fatigue and a desire to increase his surgical experience at hospitals. When the medical centre subsequently found out that the GP had a Medicare provider number to work at a rival clinic, he explained that he was helping out a family friend.

However, the GP failed to disclose that over the past year, he had taken a number of steps to set up his own rival medical practice 6km away from his current workplace.

During the GP’s notice period, the current medical centre provided substantial leniency to the GP regarding his contractual obligations, believing what the GP had told them. However, the medical centre did ask the GP to agree to a number of restrictions to protect the medical centre and reminded him of his ongoing obligations. Given that evidence in the case showed that up to 18 patients were suspected to have followed the GP to the rival clinic in a one month period, there was serious doubt in the Court’s mind about whether the GP complied with the lessened restrictions put in place by the medical centre, which became a factor in deciding the extent of the restraint that should be enforced.

Although the GP was contractually required to provide servicesto the medical centre until mid-October 2015, in August 2015, he refused to attend the centre. Perhaps not-so-coincidently, a Facebook page said that the rival medical centre was ‘open for businesses from 1 August 2015’.

What did the Court decide?

The Victorian Supreme Court was satisfied with the strength of the medical centre’s case against the GP outlining the alleged breaches of the contractual restraint of trade.

Damages were found to be inadequate and the Court was not prepared to accept the GP’s undertakings that he would abide by the restrictions previously requested by the medical centre, given the GP had shown a pattern of dishonesty and that he had not abided by the restrictions in the past.

Despite the potential financial loss the GP would face in being restrained from working at his newly established medical centre (and the 10km area around his former practice), the Court found that the balance of convenience favoured granting the interim injunction to protect the legitimate business interests of the medical centre. The Court was again critical of the GP’s history of non-truths when reviewing his financial evidence and held that the medical centre would be deprived of its contractual entitlement if the restraint was not granted at least on an interim basis.

Lessons for employers

This case shows that Courts are willing to support businesses to protect their legitimate interests by enforcing reasonable and appropriate restraint of trade obligations. Having well drafted restraint of trade clauses in your employment contracts and independent contractor agreements that are tailored to your business needs and the particular circumstances of the worker’s position is critical.

Compare jurisdictions: Arbitration

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